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Health Plan Actuarial Value Variation Among Employers. Actuarial Research Corporation Sarah Yi Jim Mays Middle Atlantic Actuarial Club 2009 Annual Meeting Session 6A. Outline of Presentation. Background EBSA Project Data Methodology Results Policy Applications Questions and Comments.
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Health Plan Actuarial Value Variation Among Employers Actuarial Research Corporation Sarah Yi Jim Mays Middle Atlantic Actuarial Club 2009 Annual Meeting Session 6A 18 September 2009
Outline of Presentation • Background • EBSA Project • Data • Methodology • Results • Policy Applications • Questions and Comments 18 September 2009
Background 18 September 2009
EBSA Project • Research was funded by the Employee Benefits Security Administration (DoL/EBSA) • The views and opinions contained in this report are solely those of the authors and do not necessarily reflect the official policy or position of the Department of Labor or the Employee Benefits Security Administration. 18 September 2009
Background • Context • Health finance reform design • Minimum coverage rules • Modification of tax exclusion 18 September 2009
Background • Definition of Actuarial Value: the fraction of average recognized medical charges which a health plan would have paid, had it been covering a standardized population with standardized medical spending levels • Actuarial Value is a single statistic that captures the effect of deductibles, copayments/coinsurance, and out-of-pocket maximums 18 September 2009
EBSA Project 18 September 2009
Research Questions/ Hypotheses • How dispersed are employer-sponsored health insurance average actuarial values? • To what degree does actuarial value predict plan cost? 18 September 2009
Goals • Actuarial values for each health insurance plan in the NCS • Percentile distributions of actuarial value • Summary distributions of plan costs within actuarial value deciles 18 September 2009
Data 18 September 2009
National Compensation Survey • Produced by Bureau of Labor Statistics • Data not available for public use • Three stage survey design • Selection of areas • Selection of establishments (from private industry) • Selection of occupations within establishments • Plans remain in sample for 5 years 18 September 2009
Uniqueness of NCS Data • Definitive source for information on ESI parameters • Well-established process • Detailed specifications • Large sample • More reliable than other datasets 18 September 2009
Use of NCS Data: Overview • Plan provisions • Premiums • Plan characteristics • Worker characteristics • Establishment characteristics 18 September 2009
Use of NCS Data: Plan Provisions • From Summary Plan Description documents abstracted by BLS analysts • Consistent with National Compensation Survey: Employee Benefits in Private Industry in the United States, 2005 18 September 2009
Use of NCS Data: Plan Provisions • Covered services (inpatient hospital, outpatient hospital, physician visits, mental health, prescription drugs) • Cost-sharing parameters • Deductibles • Copayments • Coinsurance • Out-of-pocket maximums • Presence of benefit maximums 18 September 2009
Use of NCS Data: Premiums • Collected in person or on phone by field economists • Potential mismatch in plan types (medical, prescription, dental, vision) between provision and premium data 18 September 2009
Use of NCS Data: Premiums • Premiums • Total premiums • Employer premiums • Employee premiums 18 September 2009
Use of NCS Data: Plan Characteristics • Plan characteristics • Plan type (FFS, PPO/POS, HMO) • Financing (insured, self-insured or combined) 18 September 2009
Use of NCS Data: Worker and Establishment Characteristics • Worker characteristics • Average wages • Union status • Establishment size 18 September 2009
Use of NCS Data • Kept plans with medical and drug provisions • Kept plans with a known plan type 18 September 2009
Methodology 18 September 2009
Methodology • Run a claims payment program on each plan to calculate actuarial value • Sort plans into deciles of actuarial value • Sort plans into deciles of premium • Make two-way tables 18 September 2009
Standardized Population Data for Claims Program • Based on the MEPS public use files • Controlled to National Health Accounts totals • Adjusted to 2005 levels • Over 16,000 individual records • Representative of under 65 active ESI enrollees 18 September 2009
Simplified Cost-Sharing Provisions for Plan A • $20 copay for each physician visit • $450 deductible for each hospital confinement 18 September 2009
Person 1’s Utilization and Covered Charges • Total covered charges = $5,000 • Physician office visits = 5 • Physician office visit covered charges = $1,000 • Hospital confinements = 2 • Inpatient hospital covered charges = $4,000 18 September 2009
Person 1’s Cost-Sharing for Plan A • Physician ($1,000, 5 visits, subject to $20 copay per visit) Cost-sharing collected is 5*$20 = $100 • Hospital (2 confinements at $2,000 each, subject to $450 deductible per confinement) Cost-sharing collected is 2*$450 = $900 • Total cost-sharing = physician cost-sharing + hospital cost-sharing = $100 + $900 = $1000 18 September 2009
Plan Share for Plan A with Person 1’s Utilization and Covered Charges • Plan payment = total covered charges – cost-sharing • For Person 1, plan payment = $5,000 - $1,000 = $4,000 • Plan share = plan payment/ total covered charges • Plan share for Plan A for Person 1 = $4,000/$5,000 = .8 18 September 2009
Actuarial Value for Plan A • Weighted average plan shares for each of the 16,000 people 18 September 2009
Summary of Methodology • Run a claims payment program on each plan to calculate actuarial value • Sort plans into deciles of actuarial value • Sort plans into deciles of premium • Make two-way tables 18 September 2009
Results 18 September 2009
Table 1. Deciles of Actuarial Value for Single Coverage for Enrollees Under Age 65 18 September 2009
Table 2. Average Total Premium within Each Decile of Actuarial Value for Single Coverage for Enrollees Under Age 65 18 September 2009
Table 3. Average Actuarial Value within Each Decile of Total Premium for Single Coverage for Enrollees Under Age 65 18 September 2009
Table 4. Average Actuarial Value by Plan Characteristics for Single Coverage for Enrollees Under Age 65 18 September 2009
Table 5. Average Actuarial Value by Worker Characteristics for Single Coverage for Enrollees Under Age 65 18 September 2009
Table 6. Average Actuarial Value by Establishment Characteristics for Single Coverage for Enrollees Under Age 65 18 September 2009
Policy Applications 18 September 2009
Policy Applications • Minimum standards design • Actuarial Value-based changes to tax exclusion (e.g., taxing of “Cadillac Plans”) 18 September 2009
Questions and Comments 18 September 2009
